Monday, September 28, 2009
1) Investors are flooding the market with rental properties, especially in the low cost areas east of the 215 fwy. A large percentage of sales are still going to investors so the inventory of rental properties is still increasing.
2) High unemployment means people are sharing or moving in with family members. This lowers the number of potential renters.
3) The housing credit and low cost FHA financing is taking many of those renters and making them home owners. Those that do have jobs can buy a house and in many areas the payment will be equal to or even less than renting.
This trifecta has got to be taking a toll on the rental market and it will continue to for quite a while. Will the investor rental market take a dump? Or are they picking them up at a price where they could sell them and still make a buck. In many cases I think that's what might end up happening. If the employment situations stays bad for a few years we may see a lot of these rentals up for sale. I'm sure a lot of the newbie investors will get burned. The experienced ones will probably make out like bandits.
And on a totally different note, here's a video that should really tick you off. Another morality issue? Or is this just theft?
Sunday, September 27, 2009
Friday, September 25, 2009
This is a tale of two neighbors.......
The first one lives at 18365 Berry Rd in Riverside. His house would fall under the classification of mini mansion or baby estate. It's a 4000 s/f house with 5 bedrooms and 4.5 baths. It sits on an expansive lot nearly an acre in size. It has fully landscaped ground, although nothing to fancy. The kitchen is actually rather basic looking for a house in this area. Purchased in 1999 for $430k the owner should be able to get out of this without losing any money (assuming he didn't tap the equity). Unfortunately the owner has been smoking the dream pipe and he thinks he can still get the peak price for his little chateau. He has it listed for $999k. The home looks empty so he has either moved or it may have been a rental, who knows. The listing does not indicate it's a pre-foreclosure or short sale.
Neighbor 2 lives right next door at 18383 Berry rd. This poor fella bought his mini mansion right near the peak in 2005 for $900k. It originally sold for $407k in 1999. His place is a little smaller that the pad next door. At 3400 s/f with 5 bedrooms and 2.5 baths it's a little easier to clean. The lot is about the same size although this one looks to have had a little nicer landscaping. Much of that is in serious need of water though but nothing a few thousand in plants wouldn't fix. This fella hasn't been hitting the happy pipe though. He's in trouble and he's looking to short sale this turkey. His price..... a more reasonable $499k. That's probably a fair price for this area right now. I've seen a few sell in this price range in the last few months. I think there is a good chance this will fairly quickly.
Neighbor one put his place on the market first. But his realtor should have told him there is no chance of getting a million bucks for it. Now his next door neighbor list his house for 1/2 his asking price. Maybe that will act as a reality check.....nah, he will just rationalize that because his house is a little bigger and his grass isn't dead it's worth an extra $100 s/f. These two homes sort or typify the marker right now, overpriced turkeys and short sales. That seems to sum up the current inventory!
Thursday, September 24, 2009
Now if you care to hear more about the supposed foreclosure tsunami Bloomberg has this.
The crash in U.S. home prices will probably resume because about 7 million properties that are likely to be seized by lenders have yet to hit the market, Amherst Securities Group LP analysts said.
The “huge shadow inventory,” reflecting mortgages already being foreclosed upon or now delinquent and likely to be, compares with 1.27 million in 2005, the analysts led by Laurie Goodman wrote today in a report. Assuming no other homes are on the market, it would take 1.35 years to sell the properties based on the current pace of existing-home sales, they said.
“The favorable seasonals will disappear over the coming months, and the reality of a 7 million-unit housing overhang is likely to set in,” they said.
The amount of pending foreclosed-home supply has been boosted by more borrowers going into default, fewer being able to catch up once they do, and longer time periods to seize properties because of issues such as loan-modification efforts and changes to state laws, the New York-based analysts wrote.
There were 217,000 loans in July where the borrower hadn't made a payment in at least a year but the lender hadn't begun the foreclosure process. In other words, 17% of home mortgages that are at least 12 months overdue aren't in foreclosure, up from 8% a year earlier.
Now if 217,000 is only 17% of the loans that are at least a year delinquent, that means there are nearly 1.3 million loans that are at least a year behind on payments. 1.3 million families living the dream!
Wednesday, September 23, 2009
|DESERT HOT SPRINGS||89||$91,500||$135,000||-32.22%|
|San Bernardino County||3,206||$145,000||$215,000||-32.56%|
|BIG BEAR CITY||36||$138,000||$207,500||-33.49%|
|BIG BEAR LAKE||32||$325,000||$324,000||0.31%|
|GREEN VALLEY LAKE||2||$216,250||$225,000||-3.89%|
|San Diego County||3,176||$322,000||$348,000||-7.47%|
|CARDIFF BY THE SEA||8||$540,750||$699,000||-22.64%|
|RANCHO SANTA FE||12||$1,824,500||$2,385,000||-23.50%|
They have discovered a funny thing about all these defaults. The higher the FICO score the more likely the person is to pull a strategic default. I have my own theories about why that is. A higher FICO score usually means a better job and income. Better jobs and incomes are generally the result of a better education and probably a higher IQ. This is a group of people that CAN do the math. They can and obviously are figuring out that it's going to be far better financially to let the house go.
Most economist are coming around now and realize those bubble prices are gone for a long time. The most recent estimates I've seen say 2030 before prices recover. Personally, I think that is a little too optimistic. I don't think those prices will be back for another decade past that. For prices to return to bubble levels and be affordable under normal lending levels, incomes would have to nearly triple. In a 20 year span it's more reasonable to assume incomes will roughly double (that means you need a 3.5% increase per year). And the way employment and wages are going lately we might not see any growth for a few years. Traditionally the ratio of median income to median home price has been 2.3. In 2001 it had climbed to 3.7. That was probably the result of low interest rates allowing people to buy more home for the same payment. At the peak the ratio was over 7 times median income. We are back down to about 3 (median house is $190k, median income is $65K). With the ultra low interest rates we have today the actual affordability of houses (monthly payment) is lower than it has been for decades (as long as you don't buy one with a huge mello roos tax). Whoa, getting a little sidetracked here.....
So, smarter people do the math and realize it will be decades before prices recover. Lets say they are making a payment on a $600k house that is now worth $300k. Optimistically it will be 20 years before that house is worth $600k again. Equity gain in 20 years ZERO. Lets say they got a juicy loan mod and got a 4% rate on that $600k. That's a payment of roughly $2900/mo and they will pay $696k over the 20 years.
Let's say they default, ruin their credit and cannot buy for 5 years. In 5 years they buy a similar house for $300k. No sweet loan mod though so the interest rate is 6% (that might be optamisitc) so the payments are $1800/mo. Over the 20 years they spend $432k on payments.
The difference in payments alone is $264k BUT let's not forget that home is projected to double in value over that 20 years so they have an additional $300k in equity. The net difference for this family is $564k in 20 years!
Would you be willing to give $564k to a bank just so you could tell people you live by a higher moral standard?
Sunday, September 20, 2009
|RIVERSIDE CO||SFR||Price||% chg||$/Sq Ft|
|Dsrt Hot Springs||92240||73||$84||-33.30%||$56|
|Dsrt Hot Springs||92241||9||$135||-26.00%||$73|
Thursday, September 17, 2009
Tuesday, September 15, 2009
It turns out that in 90% of the loan mods the principal balance actually WENT UP!! The banks are rolling all the late fees, back payments and other fees into the principal. If that's not bad enough, in 27% of the mods peoples payments actually went up. What the f#@k kind of loan mod is that? I'm not a big fan of loan mods. I don't really believe people should be rewarded for reckless behavior. But I do believe if we are going to allow loan mods then they should be done is such a way as to actually benefit the person. It makes not sense to do it if you're not increasing the chances of being repaid.
Homeowners who were hoping for lower payments are discovering to their dismay that lenders roll late fees, back taxes or other costs into the principal, sometimes turning a difficult payment into an impossible one. That is one reason that many reworked mortgages are sliding back into default.
Of loans modified from Jan. 1, 2008, through March 31, 2009, monthly payments increased on 27% and were left unchanged on an additional 27.5%, according to a recent report by banking regulators. Many modified mortgages fall delinquent — 25% to 40%, depending on the type of mortgage — often because of homeowners' loss of income or additional outstanding debt, according to a report last month by CreditSights, a financial research firm.
"Payments have gone up …. (and) the payment relief can last for the first few years and then go up (again)," says Alan White, assistant professor of law at the Valparaiso University School of Law in Valparaiso, Ind. He has studied the subprime mortgage situation for 10 years. "(The lenders) focus on today and not on the future." Even under the Obama plan, they don't focus on permanent debt reduction, White says.
The majority of borrowers who've gotten mortgage modifications have seen their overall principal balance go up, according to an analysis by CreditSights and ICP of about 660,000 mortgages modified this year. In about 90% of the modifications, the principal balance after a modification was larger, CreditSights said.
A total of 21,502 new and resale homes sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in August. That was down 10.8 percent from 24,104 in July, and up 11.0 percent from 19,366 in August 2008, according to MDA DataQuick of San Diego.
Last month was the 14th in a row with a year-over-year sales increase. The decline from July to August was unusual, given an increase is normal for the season. August sales in DataQuick’s statistics, which go back to 1988, range from a low of 16,379 in 1992 to a high of 39,562 in 2003. The average is 27,458.
“There’s still a lot of uncertainty out there about prices, interest rates and the availability of mortgage money. Additionally, we don’t know if this drop in foreclosure resales is temporary. We’re hearing from public agencies and the banking industry that there’s still a lot of financial distress in the pipeline,” said John Walsh, MDA DataQuick president.
The median price paid for a Southland home was $275,000 last month, up 2.6 percent from $268,000 in July, and down 16.7 percent from $330,000 in August 2008. The month-to-month increase was the fourth in a row after the median fell to a more-than 7-year low of $247,000 in April. The median peaked at $505,000 in mid 2007.
Changes in the median do not necessarily correspond to changes in home values in the current, atypical sales environment. Adjusting for shifts in market mix, it now appears that over the past two years homes in older, more costly neighborhoods have come down in value by about half as much as homes in newer, more affordable neighborhoods. Prices also fell sharply in some lower-cost, older communities where the use of risky subprime loans was high, triggering relatively high foreclosure rates.
Sunday, September 13, 2009
Below is a Redfin snapshot of Victoria Grove. As you can see there are 8 homes listed in the tract.
Below is the same tract as seen using RealQuest. There are 36 homes that have NOTs filed and are awaiting there day on the courthouse steps. There's another 21 that are already REO's. I'm sure some of those are in escrow or pending and that's why they are not showing up. There's another 36 that have NOD's filed against them. That's 93 homes in that one tract that are in trouble, yet only 10 are currently listed.
Pretty much every tract I looked at was similar to this one. I did not cherry pick this tract.
Thursday, September 10, 2009
How do we look now?
This is the median price chart. The red line is the one I put in that goes through the peak of the last bubble. That line would place the median at about $250k in 2010. If you run the line through the low of the mid 90's it comes out at about $150k. Taking the middle we should have a median price of about $200k in 2010. Last Sept the median was $247k. It was still well about the middle mark of $200k. This Sept the median is closer to $185k. Judging by this it would appear we have reached the level where solid fundamentals are once again in place. This could go a long way in explaining the increase in sales numbers this year.
This is the price to income ratio chart. Traditionally the price to income ratio for the IE stays between 2x and 3x (2.3x was the long term average till the mega bubble). Since median incomes are actually falling we are not doing quite as well when looking on this ratio. Although if you take the high end of the ratio we are still in the ball park.
The super low interest rates means that people can comfortably afford more home on less income. I think this is what's helping keep the ratio on the high side. This is ok if those people stay in the homes. It's a trap though if the rates shoot up and you need to sell. If the rates go up in late 2010 as most economists are predicting it will put another large drag on the prices. Higher rates effectively means homes cost more. People have a choice, buy less or wait for prices to fall. My guess (knowing the mentality of Southern Californians, is that people will go for option 2). When rates go up, look for prices to stagnate or fall. This will screw those people that need to sell.
My personal feelings regarding the current market.... I think that the prices are good in the less desirable areas. Anything east of the 215 is good, Anything south of Corona and even the Southern most parts of Corona are probably a solid buy. But I feel the better areas are still a little on the high side. I think if you buy a $400k "average tract home" in Corona, you could find yourself $100k upside down in a couple of years. Eventually those areas will fall into equilibrium with the rest of the market.
Tuesday, September 8, 2009
Driving down a street heading to a buddies house the other day this caught my eye. Yes, it's another fine looking home, probably somewhere between a workout and a foreclosure. Dead lawn, needs paint etc, but that's not what made me slam on the brakes, whip out the camera and take a few pics.
Ready for a little housing humor! Zooming in on the trailer the humor becomes obvious.
Hmm, maybe he should check out his own website...... btw, he does have an awesome website. btw the lawn looks WAY better in that picture than it does in real life if you can believe that.
Monday, September 7, 2009
16517 Cheltenham, Riverside, CA 92504 They were trying to get $850k after paying $1.06M. This home is now Delisted. Current value based on comps about $500k
18730 Lakepointe, Riverside, CA 92503. They paid $720k, but were hoping to get $580k when I wrote about them in late 07. The home sold in May 09 for $370k
16398 Hidden Peak, Riverside, This guy was trying to get $775k back in late 07, well it finally sold in Jan 09 for $398k.
13574 MEADOWLANDS CT, Moreno Valley, CA 92555, This guy was trying a short sale at $379k in late 07. He lost it to the bank in March and it finally sold in Dec 08 for $285k.
4467 CABOT DR Corona, CA 92883 This guys was trying to avoid the big FC but it didn't happen. He paid $1.045M and it sold in mid 08 for $560k. (these were selling around $420k this year! So the 08 buyer is already $140k in the hole. 3 have sold in the last few months all under $425k)
Loss 47% (current owners loss around $20%)
17892 GLEN HOLLOW WAY This tool was trying to get $1.1M when I wrote about him. He bought in new for $773k, He ended up loosing the house and they were only asking $270k at the auction. Wish I had know that. I would definately have bought this one! It sells for $410k in Oct 08.
Loss 47% or 66% if you go off the auction price.
Thursday, September 3, 2009
Wednesday, September 2, 2009
It's been a while since I did a delusional seller post, so here goes.
2608 Carlton Pl is an old wreck of a house overlooking Victoria Country Club in Riverside. The home was built in 1925 and the current owners have lived in it 40+ years. By the looks of the thing they haven't done much to it since they bought it. To me it looks like a tear down. At the very least any buyer would have to gut this thing and rebuild it from the ground up.
So they list this train wreck right after the market starts to tank, in Jan 2007, for 1.2 million dollars. Now, even during the heady days of the bubble getting $1.2M for this dog would have been unlikely. Now here we are 975 days later and the listing price has dropped a mind numbing........ ONE THOU! Yup, you read it right, it went from 1.2M to 1.199M and that whopping price drop only happened two weeks ago. This is another case of "what the frack is the realtard thinking". We all know this is not going to sell. Come on Roy from Realty World, do us all a favor and drop this dog!
Thre are no pics of the house bar a shot of the front (from a distance). But I have driven by this place and I can assure you there is a reason there are no pics. In addition to the house being a wreck, it's built on a huge slope, so there is no real back yard to speak of. And there's not much of a front yard either. It does over look the golf course and I'm sure there is some value to the lot. But the house looks like it should be condemned. Judging by the listing it is probably some old geezer that lives in it and doesn't care one way or the other if he sells it. Even though the listing say's "MOTIVATED", he obviously isn't. The lsiting does say "MILLION DOLLAR VIEW" and maybe that's why it's priced at 1.199M. That would imply the the house and lot are worth $199k and to me that seems about right!
Tuesday, September 1, 2009
Everything seems to be fair game. The mortgage interest deduction is high on the list of things they would like to change. Capping itemized deductions, capital gains changes etc. Cali has already hike the sales tax, the car tax and are trying everything they can to raise more money. Because of deflation, they are changing the California income tax brackets so they kick in at lower incomes. For instance a married couple making $100k will pay an additional $716! In addition they raised the income tax by .25%...double whammy!
In addition the insurance companies just got the OK raise our homeowners rates 4% to 7%, hmm, anyone wanna guess which end of that range they will pick?
And, now we pay...... You didn't really think all these bailouts were free did ya?